When Georgian Prime Minister Irakli Kobakhidze suggested this week that former lawmaker Giorgi Kandelaki, who co-authored a report on Iranian influence in his country, might face legal consequences, he framed it as a matter for "the relevant state agency."

John Walters, the president of the US-based Hudson Institute that published the report, had a different framing: "The facts are not changeable by bluster and threats. You are not the 'Georgian Dream' -- you are a destroyer of Georgian Dreams."

The exchange is a small but telling window into how badly Georgia's relationship with Washington has deteriorated, and how the ruling Georgian Dream party appears either unable or unwilling to stop the slide.

The report at the center of the dispute, published in March, documented what it described as a systematic expansion of Iranian political, religious, and economic influence in Georgia. It argued that Tbilisi had not merely tolerated Iranian penetration but actively facilitated it to "groom the next generation of Georgian Shi'ite leaders, foster loyalty to Iran's political theology, and normalize anti-American narratives."

"This activity directly threatens US national security interests in the South Caucasus, undermines Western influence, and strengthens a regime that is committed to exporting the ideology of the 1979 Islamic Revolution," the report states.

The report outlines data from the National Statistics Office of Georgia and other sources to back up its claim, including figures on Iran's economic expansion into the country.

A separate investigation in October 2025 by RFE/RL's Georgian Service found that nearly 13,000 Iranian companies are registered in Georgia -- many to a handful of addresses, with hundreds sharing single residential buildings and remote villages that show no physical trace of business activity. Iranian oil and petrochemical imports to Georgia nearly tripled between 2020 and 2024.

Publicly available Iranian trade consultancies openly describe strategies for rebranding Iranian goods as "Made in Georgia" before shipping them onward to Western markets, a move that avoids international sanctions against Tehran imposed over its nuclear program and human rights violations.

The sanctions evasion dimension is not new, but it has sharpened considerably as a Washington concern.

In May 2025, President Donald Trump warned that any country trading in Iranian petroleum would face secondary sanctions. Georgia, apparently, did not blink. Iranian petroleum imports continued with no sign of a slowdown. In the meantime, Iranian-owned companies have been securing Georgian state contracts, supplying CCTV systems to the National Bank of Georgia and Tbilisi City Hall, and hygiene products to the Georgian Defense Ministry.